Google plans to introduce yet another option for its employees to redeem value for their stock options. Currently there are two ways that an employee can make money out of their stocks -
1. On completion of the vested period, exercise them once they have vested and sell them at the current trading price, and pay back the company for their so-called grant price.
2. or hold on to them after exercising them.
However, a third option now is coming for the employees who have joined google much later than their stock prices had started to climb. Google co-founder Sergey Brin was an early proponent of the auction system, which he saw as a way to improve the fairness of the options system for newer employees whose strike prices are much higher than people even hired shortly before them, said Allan Brown, director of recognition and human resource systems at Google.
According to the auction system, pre-approved financial institutions can get into an online bid with the employees for the options that they hold. Suppose the grant price per stock was $400, and trading price is $500, the financial institution in such a case can offer something like $150 to the employee, in which case the employee would have still made $50 extra as compared if he would have sold it directly according to the trading price.
However, there still are a couple of questions -
1. How long can the financial institutions keep assuming that the stock prices are gonna continue to increase?
2. Employees would probably tend to hold on to the stocks rather than falling for such auctions - this has been the trend till now atleast.
The program is unprecedented, Google said. Microsoft and Comcast have offered one-time auction transactions to a single bidder, whereas Google's program is ongoing and involves multiple bidders, Google said.